A million millionaires: Can China’s income equality figures be believed?

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A man takes photos of a Ferrari at an auto exhibition in Beijing. Pic: AP.

One of the most important measures used worldwide to size the income inequality in the world was not published in China for over a decade. But this year, the official Gini coefficient was finally released after authorities initially said they were not going to do so.

This index revealed the gap between rich and poor was 0.474 in China in 2012. A figure of 0 represents perfect equality and 1 inequality. In the case of the 0.474, it is higher than the warning level set by the United Nations at 0.4. This puts China on about the same footing as the US, but far behind Europe, in terms of equality.

For years Chinese authorities claimed, among other reasons, that it was too difficult to get all the information and calculate the numbers, especially from the high-income groups where data was apparently incomplete. However, the issue became increasingly sensitive with many economists and respected figures asking for its publication.

This week Ma Jiantang, director of the National Bureau of Statistics (NBS), surprised commentators by making the figures public. The Gini coefficient has stayed at a relatively high level of between 0.47 and 0.49 during the past decade, said Ma.

But Gini coefficient results have been received with suspicion among the public, especially as they try to compare the income gap with the wealth gap in China.

According to the official figures, China today is nowadays more equal than in 2003. However the country has now 1,020,000 millionaires and 63,500 super-rich Chinese, according to the Hurun Report. In 50% of the cases Chinese millionaires are business owners and 60% of the them are male.

On the contrary, 13 percent of Chinese people are believed to live on less than $1.25 per day according to United Nations data, while the average annual urban disposable income is just 21,810 yuan ($3,500).

“This curve of Gini coefficient demonstrates the urgency for our country to speed up reform of the income distribution system to narrow the poor-rich gap,” added Ma. “A Gini coefficient between 0.47-0.49 shows that the gap in income distribution is relatively large.”

China’s Gini coefficient was up to 0.477 in 2011, 0.481 in 2010, 0.49 in 2009, while in 2008 had the highest figure ever at 0.491. Ma also added that the government would work to “better slice and distribute the cake” of China’s economic growth.

Comparing it with other countries, in 2011, the Gini coefficient was 0.477 in the US according to the U.S. Census Bureau.

A farmer at work in Shandong province. Credit: Rita Alvarez Tudela

But for some Chinese newspapers as the 21st Century Business Herald, before China reforms its residence permit system, which classifies people into rural population and urban residents, “it is useless to talk about the Gini coefficient.”

In an article, the economic newspaper also underlined that “until China accomplishes its overdue taxation reform and national wealth distribution reform, the Gini coefficient cannot reflect the true wealth gap in China.”

In an another article published by Beijing News Daily, it saw the Gini’s announcement as a reference for the public and explained that the primary objective for China’s income distribution reform is to double the average personal income by 2020 from the level of 2010.

“Only when the Gini coefficient drops lower than 0.4 can the government really say that Chinese society is well-off,” added the Beijing-based media.

Besides the national Gini data, Beijing has also published its own numbers, making it the capital the first city in the country to release such data.

According to original indexes, in 2012 the per capita disposable income of urban residents in Beijing was 36,469 yuan ($5,864) while the per capita net income of rural residents was 16,476 yuan ($2,650).

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